The Blog of International Judicial Assistance | By Ted Folkman of Pierce Bainbridge

Case of the Day: Derr v. Swarek

Posted on December 9, 2013

The case of the day is Derr v. Swarek (S.D. Miss. 2013). Hermann P. Derr was the owner of Derr Plantation, Inc., a Mississippi corporation. The claim was that in 2005, Derr Plantation had made a contract with Thomas L. Swarek and Thomas A. Swarek for the lease and purchase of a farm Derr Plantation owned in Mississippi. The Swareks claimed that Derr Plantation breached the agreement and sued Derr and Derr Plantation for specific performance and damages in the Chancery Court of Issaquena County, Mississippi.

In 2006, Hermann Derr died. The Swareks moved to substitute his estate as a party defendant. The court didn’t rule on the motion for three years, but the motion eventually became moot when the Swareks dimissed their claims against Hermann Derr with prejudice in 2010.

Meanwhile, 2009, Hermann Derr’s heirs brought a complaint against the Swareks in the Regional Court of Düsseldorf, seeking a declaration that the Swareks had no claim against them arising out of the Mississippi contract that had formed the basis of the Swareks’ claims in the Mississippi chancery court. The Swareks appeared in the German action. In 2010, the court in Düsseldorf denied Derr’s heirs a declaratory judgment. However, on appeal, the Higher Regional Court reversed and granted a declaratory judgment in the heirs’ favor, notwithstanding the Swareks’ dismissal of their claim against Derr (and accordingly, his estate and heirs) with prejudice:

The validity of this withdrawal [of the complaint with respect to the deceased Mr. Hermann Derr in the Mississippi lawsuit] as well as the question whether it causes a procedural preclusion (“res judicata”) with respect to the plaintiffs that did not become a party to the Mississippi proceeding can remain open. Even if this were the case, in the event of an action filed against them plaintiffs would be required to prove that the res judicata effect extends to them. Their interest in a declaratory judgment remains, because any ambiguity will be resolved at their expense.

The German court refused to apply the rule of lis alibi pendens, on the grounds that it was unclear whether Hermann Derr had been properly been served with process (it’s impossible to determine from anything I’ve read whether there was a problem with service of process in the chancery action) and that “Insofar as there may have been a lis alibi pendens initially, this obstacle was dispensed with upon the claim being dismissed against the deceased Mr. Hermann Derr.”

The German appellate court also entered a judgment requiring the Swareks to pay the costs of the proceeding, which amounted to more than € 200,000.

The Derr heirs then brought an action in the Southern District of Mississippi for recognition and enforcement of the German judgment. Mississippi has enacted neither the UFMJRA nor the UFCMJRA, and thus the case was to be decided under common law principles of comity.

It’s difficult to understand what the case is really about. On the one hand, if the Swareks had dismissed their claim against Derr and thus against his estate with prejudice, then why should they care whether the German courts decide that they have no right against the Derr heirs? On the other hand, since the Swareks did dismiss their claim with prejudice in Mississippi, why should the Derr heirs seek a declaration in Germany in the first place?

But for whatever reason, the parties did spend a fair amount of money litigating in Germany. The Mississippi court denied the claim for recognition and enforcement on the grounds that the German action had been filed after the US action for the purpose of interfering with the US action and thus was not entitled to comity under precedents such as Laker Airlines, Ltd. v. Sabena, Belgian World Airlines, 731 F.2d 909 (D.C. Cir. 1984).

The German decision seems odd to me on its own terms, though of course I hesitate to comment on the substance of a foreign judgment. Why did the German court not make an effort to figure out the procedural effect in Mississippi of a dismissal with prejudice, which would seem to me to be dispositive? And in any case, isn’t there a problem with saying, on the one hand, that the American case was not a lis alibi pendens because of the voluntary dismissal with prejudice but then saying ignoring the effect of the voluntary dismissal under US law, which on ordinary principles should, it seems to me, have been res judicata in Germany (though I would like a German lawyer’s view on that).